savanna454

This was in the business section of Melbournes Herald Sun.

http://www.news.com.au/heraldsun/sto...04-664,00.html

Worrying times ahead!

Olibeneli

At last...some one states the bleeding obvious.

I posted a thread a while back to call to question those people banging on about Oz being OK 'cos the world recession will pass them by, due to China storming along at break neck speed, without a hint of any slowdown or a mere blip at worst.

China exports loads to the west...the west does not have the capability to buy nor demand that stuff for a while ..hence China will slow down dramatically.

....in the paper the other day......the world market for recycled paper is now in freefall ......parlky due to demand to make boxes has declined. Think how much goes in a box (toys, shoes, food, ..anything)......and China makes loads of boxes for the world.

The price paid for recycled paper is now making it VERY uneconomic to collect the stuff from our doorsteps.....so stuff recycling for a while.

It is seriously grim and Stevens has I think quoted the position well.

Imagine the effect of, say GM (aka Holden) shutting up shop across the globe.........that is what Obama is facing a decision on and the markets are betting on severe rationalisations.

ABCDiamond

I am never sure about newspaper reporting and headlines.

That particular report has:

RBA Glenn Stevens said: "There is a good chance that China's economy will be looking stronger in a year's time than it does today."

and the reporter interpreted that as: " in for a rockier 2009 than the recent buoyancy on Wall St might suggest."

It is similar to the headlines about a possible interest rate cut in January, even though the RBA never meets in January.
This was based on a reporter asking Stevens where he will be during his January holiday, and his reply indicated not too far away.
That was interpreted as, he could be available for a special January meeting to create a rate cut.

TiddlyPom

Australia's last quarter growth was 1%.
Next quarter growth is forecast at 1.5 to 2%
The economy is still growing in Australia regardless of what the scare mongers from the papers will have you believe.

Devlin

I would be willing to bet more than a few dollars that Australia's inflation adjusted growth for the next quarter will be no way near 2%.

Olibeneli

Yep...I'll take that bet too.

...At least now in the UK the Labourites are not talking things up relentlessly - instead they are talking sense and facts that it is shit out there.

The political scene has shifted dramatically here in that each party has got to nail their colours to the mast on future taxes rises and public sector cut backs.

TiddlyPom

I don't know.
I was at a seminar the other day, albeit working, but I get to listen too ...
http://www.smallbiz.nsw.gov.au/smallbusiness/News+and+Events/News+(Whats+New)/NewsViewDetails.htm?guid={569605E2-25F6-481E-89D7-3772279F30CF}

James Craig from Commsec (Commonwealth Bank) gave an excellent talk on what's happening and why it's happening.. .and what the forecast future is.
The seminars are continuing through Feb and March so if you're nearby, go check it out.
I still agree that Australia's lack of involvement in the dodgy loan buying up will stand them in good stead.
But then, I'm an optimist.

Olibeneli

I think you may be High on a hill.

The issue across the globe is more than about who was involved in sub-prime lending or associated securitisation.

Oz banks may fair better........but if they have no customers..... ???

MTPockets

He also stated in the speech that:

"I do not know anyone who predicted this course of events. This should give us cause to reflect on how hard a job it is to make genuinely useful forecasts."

That's rubbish as a number of economists and analysts have been predicting these events for years.

"There is every chance that the rate of growth of China’s GDP is currently noticeably below the 8 per cent pace that is embodied in various forecasts for 2009."

No shit. Looking at that comment (and others) in context, Chinese exports fell 2.2% and imports fell 17.9% in Nov, both from the same time last year. Wholesale and manufacturing inflation have fallen, new export orders and production have fallen by the most since those surveys began. Who's Australia's biggest trading partner? China

TiddlyPom

Yes, I realise that, but it's based on that. The rest I feel is just associated stupidity ... the knock on effect.

I don't know why you think Aus banks would have no customers. The UK rate is down to what, 1-2% now? It's down even further in other countries. They have nowhere to go. At least Aus has a few comfortable percent to play with in interest rate cuts.
Some countries look like they'll be paying people to borrow money soon.

I love economics. When it's all going well, we say 'yay'. When it goes tits up, everyone bitches about the greed and mistakes.

Personally, I'm ignoring the recession. I've started a business in it and I'll continue to do what I do... I think given Australia's unprecedented period of approx 30 years growth, it could do with a little trimming.

savanna454

Wish i could share your optimism!

From the same newspaper:

'Westpac seeks $3 billion injection.............it sold 156.25 million shares to institutions at $16 each - a $1.88 discount to the $17.88 Westpac shares were fetching..............'

'Its move carved 8.54% from Commonwealth Bank's share price on expectations it also may raise capital and follows last month's $3 billion capital raising by National Australia Bank'

'.........its performance [Westpac] in July and August had been hurt by its exposure to corporate basket cases including Allco and ABC Learning........as well as for one corporate downgrade......believed to be teetering investment bank Babcock & Brown.'

MTPockets

Is that the same commonwealth bank with stock at a 3 year low, who are having to raise yet more capital to cover an overleveraged base, bad loans and increasing default rate, who (with the other banks) are screwing over the country by using their government guarantee to shift funds away from government and state bonds and who haven’t passed on full rate cuts because they claim their cost of funds are too high yet have that guarantee on loans so can actually issue at a discount? I’ll give that a miss – I’d rather take advice from you.

The issue in Australia isn’t really about sub-prime. It’s about the country’s part in the global trade cycle and the basic lag effect between consumers, manufacturers and raw materials/farming. That lag is just starting to hit here now – it was coming anyway, the ‘credit crisis’ has just accelerated it.

Your plan – sound like a great one and all the best. I just get really annoyed with the trumpeting by government and the protectionist banking sector here that everybody should go out spending and that will save the day. It won’t - that’s precisely what they shouldn’t do – they should pay off their debts. What sort of society do we live in when the solution to too much debt is more debt?

Mipik

Isn't it the american way?

Catch

WA will be ok i dont think Rob druitt reads the Herald sun

TiddlyPom

Thanks. And yes, that's the same bank.... but it's swings and roundabouts with all banks... and he wasn't actually giving advice, just talking about the economy.
I understand the lag... but with immigration at an all time high here, the lack of housing here, the tight rental market... I think that Krudd is right when he says Aus may just stave off a recession.
I have always maintained though, that Australia's lack of internal manufacturing will be the death of it though. Got to stop importing all the raw materials when it's already here. It's such a short sighted mentality.

I don't see that we have an option other than to ignore it and carry on doing what we do. I too am sick of the 'spend spend spend' mentality. My first priority is to be making enough money to support myself and my children and be debt free, like you say. I get a bit of Krudd's money in the big payout... About 30% will be saving much of it... I'll be doing just that.